Deciding Who Gets Overtime Pay

Under federal labor law, if you are an employee making, say, $11.50 an hour — which passes for decent pay these days in many jobs — you would be entitled to time-and-a-half for every hour beyond 40 hours a week. However, if you earn $460 a week in salary you often are not entitled to time-and-a-half for overtime no matter how many extra hours you work — even though your salary works out to $11.50 an hour.

The differing treatment of hourly and salaried workers is an invitation to exploitation. By giving many low-paid workers white-collar titles like shift supervisor or assistant manager, employers justify paying them a salary rather than an hourly wage and deny them overtime.

This is the sort of exploitation President Obama spoke about in March when he instructed the Labor Department to update the federal overtime rules. Under labor law dating back to 1938, workers are supposed to get overtime unless they earn a salary high enough to qualify as a professional, an administrator or an executive.

The salary threshold that defines a white-collar salary has barely budged since 1975, the last time it was updated for inflation. Today, the threshold is stuck at $455 a week, or $23,660 a year, which is below the poverty line for a family of four. Once an employer pays a worker more than that in salary, the worker is commonly no longer eligible for overtime.

The fix is easy. Simply updating the salary threshold for inflation would raise it to nearly $1,000 a week. This change would make an additional 6.1 million salaried workers eligible for overtime, including food service managers, customer service representatives, insurance claim processors and retail supervisors, according to recent estimates by the Economic Policy Institute.

Then again, nothing is easy. Raising the salary threshold is being framed by some critics as a threat to young professionals. Their argument is that a low-salary threshold allows young professionals — corporate interns, junior accountants, assistant professors and the like — to work virtually unlimited hours early in their careers, without their employers having to worry about paying overtime. If the threshold were raised, an employer might balk at letting them work those extralong hours and that would impede their climb up the career ladder.

The problem with this argument is that the overtime law is not about young professionals getting ahead. It is about workers who do not control their own time, are not highly paid and are not in jobs that ever have or ever will command professional salaries. Another problem is that government policy in the Obama administration is often debated and developed by people who were once 80-hour-a-week young professionals themselves, and thus may be susceptible to the argument against an appreciably higher salary threshold.

That argument, however, is irrelevant. In updating the overtime rules, the Labor Department should set the salary threshold at around $1,000 a week — which is where it would be now if it had kept up with inflation and other economic benchmarks over the past several decades.